Downturn in the stock markets on fears of a deficient monsoon and the impending hike in interest rates in the US will make it difficult for the government to meet its ambitious disinvestment target of Rs 69,500 crore for the current fiscal.

"We do not think markets will improve significantly in the second half and Rs 69,500 crore disinvestment target for 2015-16 looks daunting in this market," an official source said. The Finance Ministry has set a target of Rs 69,500 crore from PSU disinvestment. Of this, Rs 41,000 crore is to come from minority stake sale in PSUs and Rs 28,500 crore from strategic stake sale.

"The impending US Fed rate hike may make things difficult as it would lead to flight of foreign capital away from India," the source added. The US Federal Reserve outlook pointed to an interest rate hike in June or later in the year. Although the disinvestment department has got approval from Cabinet for selling minority stakes worth about Rs 50,000 crore in a host of PSUs, it has only been able to divest stake in one company -- REC -- so far this fiscal.

"Market conditions are too volatile for government to go ahead with its disinvestment plans," the source said, adding that although there is Rs 50,000 crore divestment in pipeline, stake sales cannot happen now. The Cabinet has already approved the sale of 5 per cent stakes in ONGC, BHEL and NTPC, and 10 per cent each in IOC, NALCO and NMDC Ltd. As per the Public Enterprise Survey 2013-14, India has 234 CPSEs, of which 46 are listed.

Market volatility has impacted valuations, in particular, of companies like Oil and Natural Gas Corp which has been on the disinvestment list since last fiscal without any action, the official said. Last week, Minister of Heavy Industries and Public Enterprises Anant Geete had said that the government is considering sale of HMT Watches, HMT Chinar, HMT Bearing, Tunga Bhadra Steels and Hindustan Cable Corporation to garner Rs 22,000 crore. In addition, the government is preparing a list of sick central public sector enterprises (CPSEs) for strategic sale. It is also contemplating the sale of prime properties worth thousands of crores owned by state-owned pharma firms such as Hindustan Antibiotics, BCPL and IDPL but are lying unutilised in cities like Mumbai, Pune and Hyderabad.